FESCO’s Bottom-Line Rises 28.2% as Fuel Sales Increase

  • Driven by strong revenue growth from its expanded operations, Future Energy Source Company Limited (FESCO) recorded a net profit of $148.37Mn for the three months ending June 2024, a 28.2% increase relative to the first quarter of 2023.
  • Revenues grew 18.6% year over year to $7.78Bn, supported primarily by higher prices and an increase in the quantity of fuel sold. As a price taker with no control over fuel supply prices, Fesco’s revenue growth was boosted by the overall year-over-year (YOY) increase in gasoline prices. (87 Octane: +J$6.08, 90 Octane: +J$9.12, ADO +J$1.06 and USLD -J$0.91).
  • Cost of sales grew by 17.6% to $7.37Bn, reflecting both high ex-refinery prices for gasoline and the increase in volumes. However, with revenue growth outpacing the growth in costs, gross profit increased by 38.7% from $297.22Mn to $412.28Mn, which translated into a slight 0.77pp increase in gross profit margin. The improvement in gross profit reflects both increasing throughput (measured in litres of fuel sold) and diversification of product offerings (fuel types including LPG) and services (increased retail presence).
  • Spurred largely by the addition of FESCO Kitson Town, FESCO Hayes, FESGAS Bernard Lodge, and FESGAS Naggo Head, Operating and Administrative Expenses grew 65.8% to $226.47Mn. Early-stage expenses related to new business ventures- such as business acquisition, property acquisition and development costs, and business integration costs- also contributed to the increase.
  • Despite higher operating expenses, operating profit increased 16.3% to $185.81Mn when compared to the $159.79Mn in the prior period. Overall, this resulted in a marginal 5 basis points decline in operating profit margin for the quarter.
  • Looking ahead, FESCO has commenced construction of its service station on Spanish Town Road, FESCO Oval, as it executes its strategy to increase its retail presence within the Kingston and St Andrew (KSA) region. Completion will take approximately fifteen (15) months, with opening anticipated in September 2025. The company plans to continue making investments in real assets and equipment to support expanding its service station businesses and network, its industrial client base, and LPG business.
  • FESCO’s stock price has decreased by 13.84% since the start of the calendar year, closing Wednesday’s trading session at $3.30. It currently trades at a P/E of 19.1x, which is slightly above the Junior Market Distribution Sector Average of 18.7x.

(Sources: JSE, Company Financials & NCBCM Research)